operating costs of $14/t, a base case scenario using February 2011 diamond prices
(current prices are 35% higher), after-taxes and royalties, estimates the project has an
NPV of $985 million at an 8% dcf (using a 3.5% price escalation factor). However,
since the original feasibility was done, rough diamond prices are some 35% higher,
meaning the potential economic viability of the project is better. We note the
feasibility study incorporates a 3.5% per year escalation factor on diamond prices,
which while supported by diamond specialists directly involved with marketing of
rough diamonds; we have a hard time with this concept over a 20-year mine life. We
know diamond markets are particularly robust, so in our bottom-line assessment we
increased the base diamond price by an additional 15% ($278 per carat) and use a 1%
escalation factor. We still derive an underlying value of $2.34/sh. We know there
are a number of optimizing scenarios which make project economics even better.